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As growth cools, the European Central Bank (ECB) is taking no chances with the banking system by offering cheap liquidity until 2023 via its targeted longer-term refinancing operations. It also extended its forward guidance with rates expected to remain at present levels “at least through the end of 2019”, which is roughly in-line with market pricing.

This helps at the margins by keeping the cost of credit cheap, but the issue in Europe has been demand for credit. For money demand to increase, Europe will be looking for an upswing in Chinese growth to boost its exports and for governments to boost spending. An increase in consumer confidence would also reduce the savings rate that picked up following a turbulent fourth quarter of 2018.

The ECB is doing all it can within its legal framework to keep money cheap, but until the demand for money picks up meaningfully, it will be pushing on a string.